Their company devises innovative technology and electronic automation for two- and three-wheelers

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Shashikanth Suryanarayanan, chairman, Sedemac, operates out of Mumbai and still teaches at IIT-BombayImage: Mexy Xavier

In 2004, when Manish Sharma joined IIT-Bombay for his master’s in mechanical engineering, the campus was abuzz with talk of a new professor in the department. “My senior Pushkaraj Panse informed me of Shashikanth Suryanarayanan, who was trying to get industry-sponsored projects for students,” recalls Sharma, 38.

A PhD from the University of California, Berkeley, Shashi had worked in the US for six years where one of his stints was at GE as the control systems engineer. He was, however, driven by a passion to create something out of India, and thus he returned in 2004 to join IIT.

Wasting no time, Sharma, along with seniors Panse and Amit Dixit, approached Shashi for an opportunity to work with him. He readily agreed. The trio worked under him not just on their academic projects, but also two industry-sponsored projects—one from Sona Koyo Steering Systems (which supplies steering systems to Maruti Suzuki) and another jointly sponsored project by TVS Motors and TIFAC (Technology Information, Forecasting and Assessment Council), a government agency that sponsors research into future automotive technology. The former required development of a technology that eliminates the mechanical linkage between a steering wheel and a tyre; instead, a motor installed on a tyre will read the steering wheel position through a sensor and turn the vehicle accordingly. The latter was for developing fuel injection engine control units for two-wheelers.

It was while working on the prototypes for these projects that they realised their common goal: Of building a technology company from India with a focus on controlled technology and bringing electronic automation in two- and three-wheelers.

In 2007, they founded Sedemac Mechatronics, an acronym for Separating Decision Making from Actuation, the operating principle behind mechatronics (the technology of combining electronics and mechanical engineering). The projects resulted in Rs 25 lakh worth of business from a leading two-wheeler OEM (original equipment manufacturer). In addition, Nexus Venture Partners decided to invest in the company.

“When we met Shashi and Pushkaraj and they described what they were doing, we felt it was relevant to the Indian market. Primarily because large players like Bosch and Delphi are focussed on four-wheeler markets. So we had a large market without a tech R&D player in this space,” says Sandeep Singhal, co-founder, Nexus Venture Partners. “They had a basic solution that they had developed while at IIT. That gave us comfort that it wasn’t just an engineering project. It could actually be converted into a product.”

Cut to 2017, and Sedemac now has top OEMs like Mahindra, Tata Motors, TVS Motor, Hero MotoCorp and diesel genset makers like Kirloskar and Ashok Leyland as its clients. Headquartered in Pune since 2010, Sedemac employs around 320 people, and has a development centre and two manufacturing plants. The first has a production floor space of 30,000 sq ft and a capacity of 50,000 units every month; the second is 25,000 sq ft and produces 2 lakh units a month.

Sharma, Panse and Dixit are based in Pune, while Shashi, chairman, Sedemac, operates out of Mumbai and still teaches at IIT. The company has raised around $10 million from Nexus, India Innovation Fund and, more recently, from Infosys co-founder Nandan Nilekani in 2016. It has been doubling its revenues year-on-year with figures for FY17 being a healthy `81 crore.

Singhal says Sedemac is a classic example of how the industry needs to work with academia to encourage innovation and achieve scale. The revenue growth has come primarily from two business lines: Smart ignition technology for two-wheelers, which is used by 9 million two-wheelers in India currently, and power train controllers for diesel gensets, used by over 1 lakh gensets.

“Every third vehicle in India uses our smart ignition technology today. Our products look like motherboards of computers. We sell these things to control what are called Power Trains (PT),” explains Shashi, 40. We are seated in a cabin inside IIT-Bombay’s business incubator, SINE (Society for Innovation & Entrepreneurship), and Shashi uses the white board behind him to explain the concepts with a diagram. “PTs are all the elements from the point of production of power to its consumption. So, in a vehicle, engine is where power is produced, and the wheels are where it is consumed. All the components in between form the PT,” he says.

So what is the impact of this technology? “The performance of PT is decided by the controller. If you do not have a good controller, no matter how good your skeletal structure is, you will not get good emissions out of it,” says Shashi.

“In addition, the smart ignition technology improves fuel efficiency, reduces exhaust pollution, provides better power performance and top speed, and the controllers for diesel gensets also help improve fuel efficiency,” says Panse, 37, chief product officer of Sedemac, who worked at Infosys for a year after his graduation in mechanical engineering.

Globally, electronic governors for engines are not produced in significant volumes and, consequently, have few global suppliers. KOEL has been buying these products from these suppliers and using them for long. They were, naturally, iffy about IPR (intellectual property rights) issues and Sedemac’s ability to deliver the product. “We tested it more rigorously than the product coming from abroad as it is a new product under development. And it passed internal and external engineering tests successfully. We had launched their product with the new engine platform in 2011... it performed better than the current one in terms of reliability in regular product and usage environment,” adds Kumar.

Rajesh Rai, advisor, India Innovation Fund, says what Sedemac has done in terms of solving a problem and building a business around it is exceptional. Rai was the fund’s CEO in 2011 when it invested in Sedemac. He says before investing, “we did our research with senior industry people. Most of the players said it is a good team solving a difficult problem. Technologists saying good things about companies needs to be taken seriously because they don’t usually do that”.

Both the companies and the investors were proved right. There are 50 million two-wheelers sold in the world annually, of which one-third are sold in India—the world’s largest two-wheeler market. Also, according to a 2015 study by 6Wresearch, a global market research and consulting firm, the Indian diesel genset market is projected to touch $4.5 billion by 2021. “We see a huge opportunity in scaling the genset controllers business also because the per-piece value is high and margins are better,” says Panse.

The company is also diversifying into other applications since last October, which includes hardware units for battery charging controllers, and other auxiliary functions like left-right turn indicator (called Flashers), voltage regulators and headlamp intensity control in a two-wheeler.

Dixit, 35, chief technology officer of Sedemac, says, “Sedemac has created unique solutions focussed around small power trains, which have traditionally not been the focus for global players.”

These technologies are monetised either by licensing them to clients or by building a product around it, says Shashi. He says it is difficult to run a licensing business in India because of a weak intellectual property protection system and difficulty in achieving scale. So, while they began licensing the technology for two-wheelers, they are increasingly transitioning to a product business.

“In case of smart ignition, we have created products around the technology. Additionally, we also license the technology in the form of a pre-compiled software package depending on what suits the customer best. In case of diesel gensets, we have built products. There is no licensing arrangement,” says Dixit.

Kumar says besides the substantial cost-savings, working with Sedemac is also beneficial because it does not “reverse engineer products”, thereby enabling changes or addition in the features or a technology upgrade. “Sedemac matches whatever there is in the world, and is willing it to take it one step ahead.”

However, for a company relying heavily on technological changes, the founders offer a contrarian view on the fast churn. “Technologies in the world don’t change fast. Especially in markets where you are talking about mass volume deployment, changes are very rare,” says Panse.

The challenge instead is to allay fears that come in the way of the first big order: Why did other people not do this? Who will fix it if it goes wrong? How does this work? One way of going around the early jitters and ensuring longevity is to bet on technologies that will “stay relevant in the future”. Says Shashi, “We take big risks in attempting technology positions. If we win, we win big. If not, nothing.”

One of the main advantages of a technology company is that the market is huge and scalability is not an issue. “You do not typically build technology companies without healthy growth margins. If you are making something for the first time, and if it sells, you should make money. As a company, we are borderline profitable. From a gross margin perspective, we are healthily profitable,” says Shashi.

Dixit says the company is now clear on what matters to customers and what needs to be done for widescale deployment of a technology. It is now gearing up for its next phase of growth from newer technologies and venturing into international markets.

Singhal says the team has done a good job of delivering solutions that are relevant for the price points required in the Indian market. “The performance they provide for their price is the best in the industry. So they can also compete with global players in international markets, just like they did in India,” he says.

The founders are in talks with global clients in markets like the US, China and Middle East. The technology Sedemac has developed for two-wheelers can also be used in non-road engines, which include lawn mowers, snow mobiles and snow blowers.

“In terms of numbers and revenues, we aren’t there. We have very small revenues from Africa and Middle East. But we have distributors and dealers for our genset control solutions and have plans to sell our products. In China, our employees are engaging with customers and doing some projects,” says Panse.

As part of its long-term plans, the quartet is now working on an innovative technology to improve fuel delivery for commercial vehicles. The second innovation they are working on is a hybrid power train technology. “We are trying to develop a hybrid vehicle technology—which means the vehicle will have a half-size engine and a half-size battery. The intelligent computer inside the vehicle will decide what mode of power to use—battery or engine—and to what extent, ultimately to ensure better fuel efficiency,” says Panse.

But perhaps the biggest bet for Sedemac in the immediate horizon, says Shashi, is on a technology called integrator starter generator (ISG), which is currently being field-tested. He adds that three to five years from now, a majority of two-wheeler and three-wheeler vehicles around the world are likely to have the integrated starter generator, whether it comes from Sedemac or not. “Now whether that actually fructifies or not is a risk,” he says, but whatever be the outcome, he adds, “we will ceaselessly look for long-term solutions and technological positions that we can take to get better and better as we go along.”

(This story appears in the 23 June, 2017 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)